National Fuel Gas Announces Second Cutback in Marcellus

National Fuel Gas Company and its subsidiary Seneca Resources announced yesterday that for the second time in two months they are further scaling back Marcellus Shale drilling in light of low natural gas prices. According to CEO David Smith they will curtail production by “a modest amount” and delay some completions in the Marcellus.

From the press release:

National Fuel Gas Company today announced its updated capital expenditure guidance for fiscal years 2012 and 2013 as well as updated production forecasts for Seneca Resources Corporation, the Company’s wholly-owned exploration and production subsidiary.

The Company is providing an updated production forecast range for the entire 2013 fiscal year of 112 to 126 billion cubic feet equivalent (“Bcfe”), which includes 88 to 98 Bcfe from the Marcellus Shale and 19 to 21 Bcfe from its California crude oil properties.

The Company is also revising its production forecast range for the entire 2012 fiscal year to 81 to 90 Bcfe, a decrease from the previous forecast of 85 to 95 Bcfe. This reduction is a result of the Company’s response to a significant decline in natural gas prices, in combination with lower-than-anticipated production from Seneca’s non-operated joint venture in the Marcellus Shale.

Currently, Seneca has curtailed natural gas production from the Marcellus Shale of approximately 15 million cubic feet (“MMcf”) per day, which represents volumes that would have been sold at spot market pricing. Such pricing typically has been lower than the value received by Seneca on volumes sold to meet current contracted firm sales agreements with various third parties. Seneca is also delaying certain well completion activities within its Marcellus operations.

“National Fuel and its subsidiaries have always focused on maximizing the long term value of assets, and today is no different,” said David F. Smith, Chairman and Chief Executive Officer of National Fuel. “Despite the headwinds we face in the current natural gas price environment, the quality of our assets and the strength of our balance sheet provide us with the flexibility to make decisions that are beneficial to the Company in the long run. By curtailing a modest amount of current natural gas production and delaying some Marcellus completions, we are still able to increase production and achieve growth across many of our businesses while preserving the value of our assets for the future when we anticipate higher natural gas prices.”

For fiscal year 2012, the Company anticipates total capital expenditures in the range of $900 to $1,045 million. The new guidance represents a decrease from the previous forecast of $950 to $1,085 million and is largely a result of the Company’s response to the significant decline in natural gas prices. The Company’s capital expenditures for fiscal 2013 will be in the range of $685 to $860 million.*

*National Fuel Gas (Mar 26, 2012) – National Fuel Gas Company Announces Updated Operational and Capital Expenditure Guidance (PDF)